The owner of toy store Hamleys has entered into discussions to acquire a stake in troubled department store House of Fraser, it has been revealed.

C Banner International Holdings, which bought Hamleys in 2015, has signed a memorandum of understanding (MoU) with Nanjing Xinjiekou department store, a company affiliated with House of Fraser’s owner Sanpower.

The Chinese firms signed the pact in Hong Kong on Tuesday with an official announcement due later in the day, sources have said.

The agreement signifies that C Banner and Nanjing have entered into talks about a sale of a stake in House of Fraser, which owns a store in Norwich’s Chapelfied shopping centre, although discussions are still at an early stage.

Shanghai-listed Nanjing owns an 89% stake in House of Fraser, and is a subsidiary of Sanpower, a Chinese conglomerate chaired by billionaire Yuan Yafei.

Nanjing is also in discussions with tourism company Wuji Wenhua over selling a 51% stake in the British department store.

The talks with Wuji Wenhua were first announced in March, but Sanpower did not rule out selling a part of its House of Fraser holdings to a third party.

The potential sale of a stake in House of Fraser has raised questions about Mr Yafei’s commitment to the troubled retailer.

However, Mr Yafei has said he is committed to House of Fraser as it puts together a turnaround strategy.

It is unclear at this stage how a combination of two of the best known names in British retail would play out, but the move comes at a delicate time for House of Fraser.

The British department store has now enlisted advisers at KPMG to look at a possible restructuring that could involve store closures.

KPMG is exploring a number of options for House of Fraser, including a Company Voluntary Agreement (CVA), a type of insolvency procedure that would allow the retailer to close stores and cut rents on other outlets.

Several household names have pursued CVAs so far this year in a bid to save costs, including New Look and Byron.